Friday, November 30, 2012

Acquisition, Disposition, Good Decision?! Key Things to Keep in ...

Due Diligence When Investing With a Self-directed IRA and/or Self-directed 401(k)? Where do I Start?

With a self-directed IRA and/or a self-directed 401(k) you are always hearing that you must do your ?due diligence?. At American IRA, we discovered that many clients did not know how to do their ?due diligence?.? While we cannot give investment advice at American IRA, we can offer a detailed summary of ?due diligence? items that our clients can use as a guide. This list gives our clients a healthy starting point that they can use during discussions with their professionals. In this article we share with you ?due diligence? items related to real estate acquisitions. As every investment is different, you should consult with your professionals about whether there are ?due diligence? items you need to consider in addition to what we share in this article.

Due Diligence ? Real Estate Acquisition ? The Basics

These are the basics that you look at if you?re buying any property whether you are buying it with your real estate self-directed IRA or self-directed 401(k) or whether you are buying it outside of your IRA. These are some items you absolutely must look at:

  • Location ? is the real estate located in a desirable location?
  • Financing ? you want to make sure you get the type of financing you need, whether it?s owner or bank.
  • Property values and comps ? you absolutely ?must? obtain these so you are educated about what you are purchasing and what its true value is in the market place.
  • Homeowner?s association rules and fees ? it is critical that you know these in advance. Did you realize that some homeowner?s association rules actually ?prohibit? you from renting or leasing the home?
  • Property liability insurance ? make sure the real estate is insurable and find out how much that insurance costs. There are some wonderful homes that are sold cheap and would make great vacation rentals in places such as Florida?but they are either uninsurable or the insurance premiums are so high that their current owners are selling.
  • Title insurance and title issues ? always make sure a title search is done on the real estate before you purchase it and always follow-up by protecting yourself with title insurance.
  • Surveys ? it is critical to obtain a survey to make sure the real estate you are purchasing as well as the land it is situated on is free from encumbrances.
  • Property condition ? a home inspection is a great way to properly assess the condition of the real estate.
  • Rental values ? check the rental values in the area to make sure that you can obtain enough in rent to cover all your expenses and still make a profit.

Due Diligence ? Real Estate Acquisition ? The Don?ts

When investing in real estate via your real estate self-directed IRA or self-directed 401(k), it is critical to avoid some common mistakes.

  • Do not trust the seller?s numbers.
  • Do not take too long to decide. Good deals do not last.
  • Do not trust appraisals unless you ordered it, paid for it, and gave the appraiser instructions.
  • Do not fudge, play with or use ?hope that this will happen with? the numbers.
    • I hope that I can rent it for $1,100. You need to know that you can rent it for $1,100. If you don?t know, use $1,000. Use the number that you know.
  • Do not underestimate the time to flip.
  • Do not overestimate the rental market
  • Do not underestimate the repairs.
  • Do not underestimate the ?as is? value.??????????

Due Diligence ? Real Estate Acquisition ? Key Thoughts

Here are some final thoughts to keep in mind when investing in real estate:

  • Do good deals.
  • Follow through and deliver as agreed to with whatever person you?re dealing with.
  • Use professionals. Many times you think ?I don?t need that professional?. Trust me when I tell you that I have seen many things that had a professional been involved, they would not have the problems they have.
  • Stay on top of the numbers/bookkeeping.
  • Do not cut corners. I have been punished every single time I?ve cut a corner. The corner-cutting gods come down with lightning bolts and they strike.
  • As soon as you think you are smarter than everyone else, you will find out ?The Hard Way? that you?re not.
  • Slow and steady beats fast and sloppy ? ALWAYS!
  • Have a plan and work your plan.
  • Do not get tangled up in the bigger better deal mentality.
  • You?ve got to be prepared to walk away at any point in time that the deal does not match up to what you want or what you believe is in your best interest.

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For more information, or to explore your options, call American IRA today at 866-7500-IRA (472). We look forward to working with you.

Jim HittJim Hitt is the Chief Executive Officer of American IRA and he has been committed to all aspects of investing for more than 30 years, using self-directed IRAs for his own investments since 1982. Jim?s forte is the financing and acquisition of real estate, private offerings, mortgage lending, business?s, joint ventures, partnerships and limited liability companies using creative techniques.

Contact Jim Hitt

Source: http://atlantareia.com/articles/the-profit/december-2012/key-things-to-keep-in-mind-when-investing-in-real-estate/

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